ICAS ICAS logo

Quicklinks

  1. About Us

    Find out about who we are and what we do here at ICAS.

  2. Find a CA

    Search our directory of individual CAs and Member organisations by name, location and professional criteria.

  3. CA Magazine

    View the latest issues of the dedicated magazine for ICAS Chartered Accountants.

  4. Contact Us

    Get in touch with ICAS by phone, email or post, with dedicated contacts for Members, Students and firms.

Login
  • Annual renewal
  • About us
  • Contact us
  • Find a CA
  1. About us
    1. Governance
  2. Members
    1. Become a member
    2. Newly qualified
    3. Manage my membership
    4. Benefits of membership
    5. Careers support
    6. Mentoring
    7. CA Wellbeing
    8. More for Members
    9. Area networks
    10. International communities
    11. Get involved
    12. Top Young CAs
    13. Career breaks
    14. ICAS podcast
    15. Newly admitted members 2022
    16. Newly admitted members 2023
  3. CA Students
    1. Student information
    2. Student resources
    3. Learning requirements
    4. Learning updates
    5. Learning blog
    6. Totum Pro | Student discount card
    7. CA Student wellbeing
  4. Become a CA
    1. How to become a CA
    2. Routes to becoming a CA
    3. CA Stories
    4. Find a training agreement
    5. Why become a CA
    6. Qualification information
    7. University exemptions
  5. Employers
    1. Become an Authorised Training Office
    2. Resources for Authorised Training Offices
    3. Professional entry
    4. Apprenticeships
  6. Find a CA
  7. ICAS events
    1. CA Summit
  8. CA magazine
  9. Insight
    1. Finance + Trust
    2. Finance + Technology
    3. Finance + EDI
    4. Finance + Mental Fitness
    5. Finance + Leadership
    6. Finance + Sustainability
  10. Professional resources
    1. Anti-money laundering
    2. Audit and assurance
    3. Brexit
    4. Business and governance
    5. Charities
    6. Coronavirus
    7. Corporate and financial reporting
    8. Cyber security
    9. Ethics
    10. Insolvency
    11. ICAS Research
    12. Pensions
    13. Practice
    14. Public sector
    15. Sustainability
    16. Tax
  11. CPD - professional development
    1. CPD courses and qualifications
    2. CPD news and updates
    3. CPD support and advice
  12. Regulation
    1. Complaints and sanctions
    2. Regulatory authorisations
    3. Guidance and help sheets
    4. Regulatory monitoring
  13. CA jobs
    1. CA jobs partner: Rutherford Cross
    2. Resources for your job search
    3. Advertise with CA jobs
    4. Hays | A Trusted ICAS CA Jobs Partner
    5. Azets | What's your ambition?
  14. Work at ICAS
    1. Business centres
    2. Meet our team
    3. Benefits
    4. Vacancies
    5. Imagine your career at ICAS
  15. Contact us
    1. Technical and regulation queries
    2. ICAS logo request

FRC issues coronavirus guidance for auditors

  • LinkedIn (opens new window)
  • Twitter (opens new window)
By James Barbour, Director, Policy Leadership and Russell Leitch, Senior Audit and Practice Monitoring Reviewer

17 March 2020

Key points

  • The FRC has issued guidance for auditors. Additional ICAS points are clearly highlighted below.
  • The FRC highlights that the increasing spread of coronavirus has consequences for companies proposing to report their results in the coming weeks and months, and for their auditors.
  • The FRC acknowledges that additional time may be required to complete audits and it is important that this is taken, even at the risk of delaying company reporting.

The Financial Reporting Council (FRC) has issued guidance (16 March 2020) for auditors in light of the current spread of coronavirus.

It recognises that the level of uncertainty about the immediate outlook for many companies has increased sharply and therefore impacts on companies proposing to report results in the coming weeks and months, and for their auditors.

The guidance covers the following areas:

1. Logistical issues in preparing accounts and undertaking audits

Some companies and auditors are facing practical difficulties in preparing accounts and carrying out audits. The FRC expects this will affect the way in which audit firms carry out their audit of those companies, given ever increasing restrictions on travel, meetings and access to company sites in some jurisdictions and the need to develop alternative audit procedures to gather sufficient, appropriate audit evidence.

ICAS adds that these logistical issues are likely to also have an impact on audits which are solely being undertaken in the UK. With airlines and trains likely to decrease their level of operations in the coming days and weeks, the ability to travel within the UK is likely to be restricted.

2. Audit quality remains paramount and additional time may be required to complete engagements

The FRC reminds auditors of the continued need for audits to comply fully with applicable standards. It highlights that given the current circumstances, additional time may be required to complete audits and it is important that this is taken, even at the risk of delaying company reporting.

ICAS adds that auditors should be proactive in discussing planed audit timetables with clients whilst accepting that even revised timetables may be subject to sudden change given the fluidity of the situation. These timetables should be regularly revisited to allow for likely interruption to audit fieldwork and potentially the increased time it will take companies to prepare their respective information packs. Additionally, the likelihood of staff resources being depleted at both the audit firm and at the audited entity needs to be considered.

3. The impact of coronavirus on an auditor’s risk assessment of a company.

The FRC highlights that one of the key issues is the auditor’s risk assessment, and whether this needs to be revised. As the current situation is very fluid this is something that will need to be constantly reconsidered during the course of the audit.

ICAS adds that the audit firm will need to consider the likely impact of coronavirus on the entity’s staff and operations. Where has the threat level of existing risks been magnified and indeed is an entity now exposed to new significant risks? Has the audited entity any plans and measures to mitigate any such risks? Liquidity may feature strongly in such considerations.

4. Obtaining Audit Evidence

How the auditor gathers sufficient, appropriate audit evidence, recognising that the planned audit approach may need to change, and alternative procedures developed, particularly in group audit engagements. The FRC reminds auditors they must be able to gather the necessary, sufficient and appropriate evidence to be able to report or consider modifying their audit opinion. This ties in with point 2 above and the potential need for additional time to complete audits.

ICAS envisages that greater use will be required of technology in relation to the sharing of data and in the hosting of virtual meetings. Steps of course will need to be taken to ensure that appropriate security measures are in place when utilising such technological means.

5. Group audit review considerations

The FRC is concerned that the current situation should not undermine the delivery of high-quality audits. Therefore, group auditors need to consider how they plan to review the work of component auditors to meet the requirements in the standards, including considering whether alternative procedures can be used: for example, where travel is restricted. This ties into the increased use of technology noted at 4 above.

6. Implications for the auditor’s assessment of going concern and an audited entity’s future prospects recognising the high level of uncertainty

This will undoubtedly be a key focus of many current and forthcoming audits given that uncertainty about the global economy and the immediate outlook for many companies has increased.

In terms of the applicable ISA this remains the June 2016 version of ISA 570 ‘Going Concern’ although auditors can early adopt the 2019 version of the standard.

ICAS also highlights that consideration has to be given to the difficulties that management may have in preparing future projections given the fluidity of the situation. Indeed, such projections could change significantly in a short space of time. Care therefore has to be exercised to ensure that any projections reflect the situation as and when an audit report is to be signed.

7.The need to consider the adequacy of disclosures made by management about the impact on the company of COVID-19

This is to ensure that users of the financial statements are properly informed, and the company’s prospects and how they might be affected are appropriately described, recognising the high degree of uncertainty that currently exists.

ICAS adds that auditors need to also consider their responsibilities in relation to other information presented by management with the financial statements. This is covered in ISA (UK) 720 ‘The  Auditor’s Responsibilities Relating to Other Information’ and of course very much depends on the nature of the audited entity e.g. is it a premium listed entity.

8. The need for the auditor to reassess key aspects of their audit on an ongoing basis

As a result of the fast-changing situation, recognising that this assessment will take place right up to the point of signing the auditor’s report, and may need the provision of further evidence and information by management. The points at 3 and 6 above very much fall into this category. Where the current circumstances have had a significant impact on the delivery of the audit, the auditor will need to consider how to explain this in their report, for example, by reporting this as a key audit matter.

ICAS adds that, while the vast majority of audit reports do not require the reporting of key audit matters, audit firms are still required to consider the impact of current circumstances on the overall audit and the audit report. For example:

  • The impact of potential going concern issues including whether a material uncertainty exists.
  • The sufficiency of audit evidence including circumstances where there is a limitation of scope.
  • Whether sufficient disclosure is presented in the financial statements and whether the auditor should draw the users’ attention to any specific matters via an emphasis of matter paragraph.

Further information is provided in the full FRC guidance. The Financial Reporting Council (FRC) has previously published guidance for companies on disclosure of risks and other reporting consequences arising from the emergence and spread of COVID-19.

The FRC and ICAS are continuing to consider what additional advice and guidance may be necessary to support the audit profession in delivering audits in the coming months.

ICAS members with queries on any technical matter relating to the current situation are advised to submit these as normal via the online portal at icas.com. If it is then deemed necessary, this might lead to a telephone discussion at a mutually convenient time with an appropriate member of the ICAS team.

ICAS has also taken the decision that all onsite practice and audit monitoring inspection visits are to be postponed until 31 May 2020. The attendance of reviewers at office and home office premises is an unnecessary risk. ICAS will look to explore remote desktop visits as an alternative and believe that some firms will be able to accommodate a desktop review.

Companies House issues coronavirus advice for its customers

By Jeremy Clarke Assistant Director, Practice and James Barbour, Director, Policy Leadership

16 March 2020

2-23-marsh 2-23-marsh
ICAS logo

Footer links

  • Contact us
  • Terms and conditions
  • Modern slavery statement
  • Privacy notice
  • CA magazine

Connect with ICAS

  • Facebook (opens new window) Facebook Icon
  • Twitter (opens new window) Twitter Icon
  • LinkedIn (opens new window) LinkedIn Icon
  • Instagram (opens new window) Instagram Icon

ICAS is a member of the following bodies

  • Consultative Committee of Accountancy Bodies (opens new window) Consultative Committee of Accountancy Bodies logo
  • Chartered Accountants Worldwide (opens new window) Chartered Accountants Worldwide logo
  • Global Accounting Alliance (opens new window) Global Accounting Alliance
  • International Federation of Accountants (opens new window) IFAC
  • Access Accountancy (opens new window) Access Acountancy

Charities

  • ICAS Foundation (opens new window) ICAS Foundation
  • SCABA (opens new window) scaba

Accreditations

  • ISO 9001 - RGB (opens new window)
© ICAS 2022

The mark and designation “CA” is a registered trade mark of The Institute of Chartered Accountants of Scotland (ICAS), and is available for use in the UK and EU only to members of ICAS. If you are not a member of ICAS, you should not use the “CA” mark and designation in the UK or EU in relation to accountancy, tax or insolvency services. The mark and designation “Chartered Accountant” is a registered trade mark of ICAS, the Institute of Chartered Accountants of England and Wales and Chartered Accountants Ireland. If you are not a member of one of these organisations, you should not use the “Chartered Accountant” mark and designation in the UK or EU in relation to these services. Further restrictions on the use of these marks also apply where you are a member.

ICAS logo

Our cookie policy

ICAS.com uses cookies which are essential for our website to work. We would also like to use analytical cookies to help us improve our website and your user experience. Any data collected is anonymised. Please have a look at the further information in our cookie policy and confirm if you are happy for us to use analytical cookies: